The Votes are in, and now onto the details; Check out the fine print; and we hope the Newsletters go through
SPECIAL ALERT: The Street Brawl begins and the President is WRONG!!!
Someone has to standup to 'this bully on tax cuts for the Home-base Business Community,' sound bites and all.
The President appears to be upset over estate and gift reductions [the last major change was in 1981 when it went from $60,000 to $600,000 and today, 20 years later, it is $675,000, that is wrong, and the President knows it, inflation alone would make the $600,000 over $1M today, and making it an exclusion rather than an Unified Credit is fair, so that first dollar gets taxed at the lowest rate].
1. Tax Policy is Important for Small Business Owners
The House Republicans will be pushing Small Business Tax Cuts, including reducing the Estate and Gift Tax Costs today and tomorrow, along with repealing the repeal of the installment sales treatment for accrual method taxpayers. It is a good bill.
The key sound bite is: '--Reduce the top estate tax rate from 55 percent to 50 percent by 2002, reduce all estate tax rates by 1 percentage point in 2003 and 2004, and repeal a surcharge that applies only to estates worth over $10 million...' and is terribly misleading.
What H.R. 3833, 'The Small Business Fairness Act,' does, effective for deaths and gifts made after December 31, 2000, is to change the Exemption [Unified Credit Amount] to an Exclusion, which means that the $675,000 to $1,000,000 will come off the top, not the bottom. In short the Unified Rate Schedule that starts at 18% on the first $10,000 and goes to 50% for amounts above $2M will be applicable to transfers after the the $675,000 to $1M has been taken off, as the case may be. Today the Unified Credit Amount [ Equal to taxable amounts of $675,000 in 2000] is taken off but the next dollar then starts at 37%.Rates will be reduced 1 percentage point in 2003 and 2004 across the board, and the maximum is fixed at 50%.
More importantly for Small Business Owners is the 100% deduction for health care, the increase in pension plans, including loan provisions for the Self-Employed and S Corp. Plans, increased IRC Section 179 expensing from $20,000 to $30,000. Also included would be an increase in Low Income Housing Credits, and the beginning of the Community Renewal Act Program [15 Zones], which we strongly support. Total cost over 10 years is set at $120B.
In 1998 the same Small Business Tax Cut Plan was proposed, at a cost of $80B over 10 years, but per President Clinton, it would have broke the bank. Today with projected non-social security surpluses at $2T over 10 years, he is saying that again. We respectfully disagree, and suggest that they should have at least made these changes retroactive to 01/00/00, if they really wanted to show the taxpayers some respect.
2. Education deductions, how to do it today
Yesterday's Newsletter, which apparently did not go out, suggested that the Joint Committee on Taxation ['JCT'] had published their annual analysis of the President's Budget Proposals [500+ pages]. Buried therein was an analysis of IRC Section 127, the Employee's Exclusion for Employer provided education benefits, which is not applicable to non-corporate employers or closely held corporations' key employees. As we have previously noted, education benefits could fall under IRC Section 132 as a working fringe benefit, and could be excluded in the C Corp. situation. The JCT confirmed this result.
What does that mean to the family that has children going to private school; who is involved with home schooling; and/or has a key employee who wants to take one of the new high technology graduate programs now being offered online for $25,000 to $30,000? Incorporate and adopt the right corporate policies and then require your key employees to stay up today, at the employer's expense of course.
3. Yesterday we sent out two Newsletters 03/06/00 and 03/07/00
We enjoy doing our Newsletters, and we hope you find them helpful, but sometimes they do not get sent through the system. We will try again, and hope they make it. There is good stuff in each one, including kids doing movies, tax policy issues between the candidates [the one dealing with tearing up 44,000 pages of the IRC apparently will not make it--we suggest they start someplace else] and some helpful hints, enjoy. If not just delete.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.